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Equity Compensation Agreement

Equity Compensation Agreement Template for United Arab Emirates

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Key Requirements PROMPT example:

Equity Compensation Agreement

"I need an Equity Compensation Agreement for our Dubai-based technology startup, offering stock options to senior developers with a four-year vesting period starting March 2025, including specific provisions for our DIFC free zone status and exit scenarios."

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Document background
The Equity Compensation Agreement is a vital instrument for UAE-based companies seeking to attract, retain, and motivate key employees through share-based incentives. This document becomes necessary when companies wish to offer equity participation as part of their compensation strategy, whether through share options, restricted stock units, or other equity instruments. The agreement must comply with UAE Federal Law No. 32 of 2021 (Commercial Companies Law), Federal Decree-Law No. 33 of 2021 (Labour Law), and the new corporate tax framework introduced in 2023. The document details vesting schedules, exercise procedures, regulatory compliance requirements, and tax implications specific to the UAE jurisdiction. It's particularly relevant for companies in free zones like DIFC and ADGM, as well as mainland UAE companies, requiring careful consideration of the specific regulatory environment in which the company operates.
Suggested Sections

1. Parties: Identification of the company granting the equity compensation and the recipient employee

2. Background: Context of the agreement, including the employee's role and the company's equity compensation program

3. Definitions: Key terms used throughout the agreement, including specific definitions of equity instruments, vesting periods, and valuation terms

4. Grant of Equity: Details of the equity being granted, including type, amount, and any applicable conditions

5. Vesting Schedule: Detailed timeline and conditions for the vesting of equity, including any cliff periods and acceleration provisions

6. Exercise Terms: Conditions and procedures for exercising equity rights, including pricing and payment mechanisms

7. Regulatory Compliance: Provisions ensuring compliance with UAE corporate, securities, and labor laws

8. Tax Obligations: Allocation of tax responsibilities and implications under UAE tax laws

9. Restrictions on Transfer: Limitations on the transfer, sale, or encumbrance of the equity

10. Termination Provisions: Effects of employment termination on equity rights

11. Confidentiality: Provisions protecting company confidential information

12. Governing Law and Jurisdiction: Specification of UAE law as governing law and jurisdiction for disputes

Optional Sections

1. Shareholder Rights: Details of voting rights and other shareholder privileges, if applicable to the type of equity granted

2. Change of Control: Provisions addressing the impact of company ownership changes or mergers

3. Lock-up Period: Additional holding period requirements beyond vesting, if applicable

4. Sharia Compliance: Specific provisions ensuring compliance with Islamic law principles, if required

5. Free Zone Provisions: Additional provisions for companies operating in UAE free zones

6. International Tax Considerations: For expatriate employees or international equity plans

7. Clawback Provisions: Terms for recovering equity in case of misconduct or specific trigger events

Suggested Schedules

1. Schedule 1 - Equity Grant Details: Specific details of the equity grant including number of shares/options and grant date

2. Schedule 2 - Vesting Schedule: Detailed breakdown of vesting dates and quantities

3. Schedule 3 - Exercise Notice: Template form for exercising equity rights

4. Schedule 4 - Shareholders Agreement Extract: Relevant provisions from the company's shareholders agreement

5. Schedule 5 - Regulatory Compliance Checklist: List of regulatory requirements and compliance steps

6. Appendix A - Valuation Methodology: Agreed method for valuing the equity for various purposes

7. Appendix B - Tax Treatment Summary: Overview of tax implications and treatment under UAE law

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Linkedin in social icon imageX social icon image
alex.den.21@genieai.co
Relevant legal definitions
Agreement
Applicable Law
Award
Board
Cause
Change in Control
Company
Confidential Information
Corporate Tax
Date of Grant
Disability
Effective Date
Eligible Employee
Employment Agreement
Equity
Exercise Date
Exercise Notice
Exercise Period
Exercise Price
Fair Market Value
Free Zone
Good Leaver
Grant Notice
Group Company
Holding Period
Lock-up Period
Market Price
Parent Company
Plan
Poor Leaver
Regulatory Authority
Restricted Stock Units
SCA
Securities
Share Capital
Shareholders Agreement
Shares
Stock Options
Subsidiary
Tax Year
Termination Date
Transfer
UAE
Vested Shares
Vesting Date
Vesting Period
Vesting Schedule
Clauses
Grant of Equity
Vesting Conditions
Exercise Rights
Transfer Restrictions
Regulatory Compliance
Tax Obligations
Termination Provisions
Change of Control
Confidentiality
Non-Competition
Non-Solicitation
Company Representations
Employee Representations
Securities Law Compliance
Shareholder Rights
Tag-Along Rights
Drag-Along Rights
Right of First Refusal
Put and Call Options
Valuation Mechanisms
Corporate Actions
Dispute Resolution
Governing Law
Assignment
Amendments
Notices
Entire Agreement
Severability
Force Majeure
Data Protection
Regulatory Disclosures
Exit Provisions
Lock-up Obligations
Clawback Rights
Death and Disability
Good/Poor Leaver Provisions
Relevant Industries

Technology

Financial Services

Professional Services

Healthcare

Real Estate

E-commerce

Manufacturing

Consulting

Media and Entertainment

Energy

Telecommunications

Start-ups

Retail

Relevant Teams

Human Resources

Legal

Finance

Executive Leadership

Board of Directors

Compensation Committee

Corporate Governance

Compliance

Tax

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Chief Technology Officer

Senior Vice President

Managing Director

Department Head

Senior Manager

Technical Lead

Principal Engineer

Senior Developer

Key Account Manager

Regional Director

Project Manager

Research Scientist

Product Manager

Sales Director

Legal Counsel

Human Resources Director

Industries
UAE Federal Law No. 8 of 1980 (UAE Labor Law): The fundamental employment law that governs employment relationships and compensation matters in the UAE, including provisions related to employee benefits and rights
UAE Federal Law No. 32 of 2021 (Commercial Companies Law): Governs corporate structures and ownership in the UAE, including regulations about share issuance and transfer, particularly relevant for equity compensation arrangements
UAE Federal Decree-Law No. 47 of 2022 (Corporate Tax Law): New corporate tax framework that affects how equity compensation is taxed and valued, including implications for both employers and employees
Securities and Commodities Authority (SCA) Regulations: Regulations governing securities, including rules about private placements and share offerings that may apply to equity compensation schemes
UAE Central Bank Regulations: Relevant for any financial aspects of equity compensation, particularly regarding valuation and payment mechanisms
DIFC/ADGM Regulations (if applicable): Special regulations that apply if the company is registered in free zones like Dubai International Financial Centre or Abu Dhabi Global Market, which have their own comprehensive legal frameworks
UAE Federal Decree-Law No. 33 of 2021 (Labour Law): Updated labor law that includes provisions about employee compensation and benefits, affecting how equity compensation can be structured
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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